10 States Where Retirees Get Smaller Social Security Raises

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published 1 November 2024

Are you wondering what your 2025 Social Security monthly benefit will be? All Social Security beneficiaries receive the same COLA percentage increase at the start of the year, but recipients in states with lower monthly SS benefits will see the lowest increases in their checks compared to other states. How can this be if everyone receives the same raise? There isn't one answer that explains why, so let's dig in.

Social Security benefits are based on lifetime income and the age you claim your benefits. Ultimately, how much you get depends on the Social Security benefits formula. If you want to ensure you receive the biggest benefit possible, consider waiting to claim your Social Security benefits. You will receive an extra 2/3 of 1% for each month you delay after your birthday month, adding up to 8% for each full year you wait until age 70. If you defer claiming benefits until age 70, you'd receive 132% of your full retirement benefit.

Social Security benefits are computed using average indexed monthly earnings (AIME)." This is your average monthly earnings over your 35 highest-earning years, adjusted for inflation. Social Security uses the Average Wage Index (AWI) to adjust your wages for inflation, ensuring that only those years where you earn the most are used to calculate your benefit. The Social Security Administration (SSA) applies a formula to this average to compute the primary insurance amount (PIA). The PIA number is the basis for the benefits that are paid to an individual.

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That is where we will stop before this turns into a math lesson instead of an explanation of why retirees in some states will see the lowest COLA increases. If you are interested in learning how to estimate your Social Security benefits, use these six steps to understand how your benefits are determined and how much you'll receive.

The important takeaway here is that your earnings play a huge role in determining what your Social Security monthly benefits will be when you retire.

Why retirees in some states receive lower monthly benefits and smaller COLA increases

The SSA publishes the Annual Statistical Supplement to the Social Security Bulletin that includes extensive data about the program, payment amounts, and demographics of recipients. The data used here are from the 2023 bulletin, showing the distribution of retired-worker beneficiaries by monthly benefit by state as of December 2022. The 2022 figures are the most-recent final annual data available. While these data don't reflect either the 2023 or 2024 COLA increases, they are useful in illustrating how benefit amounts impact COLA increases overall.

Retired workers in the 10 states below would receive the smallest cost-of-living adjustments (COLAs) in terms of dollars. That is the case because they receive the smallest median Social Security benefits, and a COLA increase is based on the individual recipient’s monthly benefit. All retirees will see the same percentage change in their checks in 2025 — an increase of 2.5%. However, the average beneficiary in some states will receive less than in others. For example, the average beneficiary in Mississippi will see an annual bump on a dollar basis of $483 (or $40.25 monthly), which is $122 less than the average beneficiary in New Jersey, who will see an annual increase of $605 (or $50.40 monthly).

Where a retired worker chooses to live has no direct impact on their Social Security benefit, but it does impact employment opportunities, and pay scale which are factors that will impact your lifetime earnings and the size of your Social Security check.

The median annual salary for all Americans is $60,580 or $1,165 a month, according to the Bureau of Labor Statistics (BLS) Usual Weekly Earnings Of Wage And Salary Workers Q3.

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States with the Lowest and Highest Average Annual Salary/Average Hourly Wage for Retired Workers
States	Average annual salary	Average hourly wage
Lowest	Row 0 - Cell 1	Row 0 - Cell 2
Mississippi	$45,180	$21.72
Arkansas	$48,570	$23.35
West Virginia	$49,170	$23.64
Highest	Row 4 - Cell 1	Row 4 - Cell 2
Massachusetts	$76,600	$36.83
New York	$74,870	$36.00
California	$73,220	$35.20

While Mississippi, Arkansas and West Virginia have the lowest average annual salaries in the US., Massachusetts, New York and California have the highest average salaries, according to Forbes. The difference between the annual salaries in West Virginia and Massachusetts is $31,420. That means folks in West Virginia, on average, earn almost 40% less than their counterparts in Massachusetts.

To determine your benefit, the SSA calculates your average indexed monthly earnings during the 35 years in which you earned the most. This results in beneficiaries with lower lifetime earning receiving smaller lifetime benefits and annual COLA increases.

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States (Or Districts) with the Smallest and Biggest Median Social Security Benefit for Retired Workers
State	Median benefit	Monthly COLA 2.5% increase	Annual COLA 2.5% increase	Median monthly benefit with 2.5% COLA
10 states with smallest monthly benefits	Row 0 - Cell 1	Row 0 - Cell 2	Row 0 - Cell 3	Row 0 - Cell 4
Mississippi	$1,610.90	$40.27	$483	$1,651.17
Louisiana	$1,611.40	$40.28	$483	$1651.69
District of Columbia	$1,613.00	$40.33	$484	$1,653.33
New Mexico	$1,629.90	$40.75	$489	$1670.65
Arkansas	$1,651.90	$41.30	$495	$1,693.20
Alaska	$1,659.90	$41.50	$498	$1,701.49
Maine	$1,665.90	$41.65	$500	$1,707,55
Montana	$1,680.00	$42.05	$504	$1,722
Kentucky	$1,681.90	$42.05	$505	$1,724.95
South Dakota	$1,706.00	$42.65	$512	$1,748.65
Row 11 - Cell 0	Row 11 - Cell 1	Row 11 - Cell 2	Row 11 - Cell 3	Row 11 - Cell 4
5 states with largest monthly benefits	Median benefit	Monthly COLA 2.5% increase	Annual COLA 2.5% increase	Median monthly benefit with 2.5% COLA
New Jersey	$2,015.90	$50.40	$605	$2,066.30
Connecticut	$1,996.00	$49.92	$599	$2,045.92
Delaware	1,978.90	$49.47	$594	$2,028.37
New Hampshire	$1,945.90	$48.65	$584	$1,994.55
Michigan	$1,931.00	$48.27	$579	$1979.27

The data used in the table is from Annual Statistical Supplement, 2023, Table 5.J6.

Donna joined Kiplinger as a personal finance writer in 2023. She spent more than a decade as the contributing editor of J.K.Lasser's Your Income Tax Guide and edited state specific legal treatises at ALM Media. She has shared her expertise as a guest on Bloomberg, CNN, Fox, NPR, CNBC and many other media outlets around the nation. She is a graduate of Brooklyn Law School and the University at Buffalo.